Lessons from Japan's deflationary spiral

JAPAN

clock

Valentijn van Nieuwenhuijzen, head of strategy at ING IM, looks at what the eurozone can learn from Japan's longstanding deflationary spiral.

Both Greece and Italy have a lower debt to gross domestic product ratio than Japan. Yet, Japan pays very low long-term nominal bond yields. Why can Japan afford a debt of 200% (versus GDP), while markets require much higher bond yields from eurozone peripheral countries? The eurozone can learn from Japanese policy making. Since approximately 1995, the US economy and the eurozone economy have seen around 70%-80% increases in nominal GDP (inflation included). The Japanese economy is an outliner as it is still some 10% below the peak of early 1997. The main culprit is a declining trend in p...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Why China's journey to net zero demands investors' attention

Why China's journey to net zero demands investors' attention

China's journey towards net zero could yet prove more rapid than expected

Gabriel Sacks
clock 07 May 2025 • 4 min read
Morningstar CEO: Advisers and industry need 'shared language' around risk

Morningstar CEO: Advisers and industry need 'shared language' around risk

Kapoor points to UK regulation becoming more ‘goals focused’

Sahar Nazir
clock 07 May 2025 • 2 min read
PA360: 'Diversified approach has room for both active and passive' - David Coombs

PA360: 'Diversified approach has room for both active and passive' - David Coombs

‘Volatility is your friend if you are a long-term investor’

Jenna Brown
clock 01 May 2025 • 2 min read